The principal economic message from Josh Frydenberg’s second pandemic budget is that while the recovery is running apace, the economy remains fragile and unable to stand on its own two feet.
Monetary policy is spent, population growth is subzero, migration has stalled. Fiscal policy is the only game in town.
The government has no option but to continue spending. A premature withdrawal would jeopardise the revival.
The question that tonight’s document will answer is whether it will spend smart or spend stupid.
The political dimension to this budget is just as potent as the economic imperative, with talk of a November election back on the cards.
Record spending on disabilities, mental health and aged-care cuts to the core of Labor’s foundational pitch and neutralises the counter-attack in territory where the Liberal Party would have been traditionally vulnerable.
Scott Morrison’s political agenda leaves Anthony Albanese with little room to move.
Coupled with the subsidising of apprentices and skills, irrespective of JobKeeper, the Prime Minister will continue the incursions into Labor’s heartland, courtesy of the pandemic.
The danger for Morrison is that the spending profile ignites an arms race on spending.
The justification will be based on core principles. The Coalition will argue that where Labor thinks money falls out of the sky, it is the utility of a strong economy that delivers funding for services.
The most vivid example of the political pitch that underpins this budget is the housing sector-led recovery.
Morrison and the Treasurer, driven by the retail economics persuasion of Housing Minster Michael Sukkar, tapped into a swinging cohort long before COVID arrived and when the housing affordability crisis was at its peak in 2017.
Since then, they have sought to exploit a theme that underpins Morrison’s political and economic agenda.
COVID-19 supercharged it.
It begs the question as to why Anthony Albanese chose the housing stimulus measures, which Treasury has acknowledged was a primary driver of the recovery, of all pandemic polices to mark a point of difference with the government.
This was, and will continue to be, a Menzian principle that Morrison has sought to re-establish as a cornerstone of his own prime ministership, led by Sukkar’s unrelenting political dogma that has sought to recapture blue-collar workers — those who build homes — and aspirational outer suburban marginal seat constituents who want to own one.
The subtext to tonight’s budget is Morrison’s election pitch of 2019 writ large. The Coalition has sought to neutralise Labor’s traditional beefs, extinguish an opportunity for a grievance-based counter-attack and consolidate the party’s dominance as preferred custodian of economic management –– with or without a crisis.
The intervention in the housing sector is the most dramatic, if not recognised, expression of the government’s political agenda.
It is reasserting itself as the party of aspirational home ownership with a view that a family that buys a home makes an immediate investment in the health of the economy. At the same time it is pitching to those who want to own a home, it is appealing to blue-collar tradies building them — of which there are almost a million.
There is little subtlety to Morrison’s approach. Which makes it all the more bewildering Albanese wants to make housing policies a key point of ideological difference.
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